Rent Extraction: Quebec Edition

Ah, campaign finance. There's always a workaround.

Suppose you're worried about undue corporate influence on politics because of corporate donations. So you ban it. Here's the Winnipeg Free Press on a lovely Quebec case study.

It has been illegal since the 1970s for companies to make political donations in Quebec...

Suppose there's still demand among political parties for donations though. What do you do? You tell your employees to make personal donations and you reimburse them for it. Maybe you have their whole families do it up to the personal donation limit, as in a fun Ontario case. And that's what happened in Quebec too:

A vice-president at SNC-Lavalin (TSE:SNC) admitted to participating in such financing activities while testifying Thursday at Quebec's corruption inquiry.

Yves Cadotte said dozens of SNC executives, and sometimes even their spouses, donated just over $1 million to the Quebec Liberal party and the Parti Quebecois between 1998 and 2010. A small majority of that cash went to the Liberals, although the PQ got nearly 50 per cent of the amount.

He said executives would get company bonuses after they donated, with the amount of the bonus greater than the donation amount.

What do you do then?

...the law was tightened in 2010 to crack down on companies that reimbursed people for making endorsements.

SNC-Lavalin notes that their practice was entirely in keeping with the letter of the law prior to 2010. And I would be surprised if there weren't other workarounds for the post-2010 period.

In a tense exchange, Cadotte was told by a commission lawyer he was breaking election laws and was asked whether he was aware it was illegal for companies to donate.

Cadotte replied yes.

But he said it was the political parties that came to solicit the money. He said the parties would even set fundraising targets for his company.

SNC-Lavalin received 550 contracts, worth $247.5 million, from Quebec's Transport Department between 1997-98 and 2011-12.

Cadotte said he didn't believe the donations helped get public contracts. On the other hand, he said the company was afraid of what would happen if it didn't donate.

"That's the dilemma: not contributing would be a risk that is perhaps intangible," he said. "Maybe there is no (consequence), but in our mind it's a risk we don't necessarily want to take."

Why is it legal for political parties to have fundraising targets from corporates that are forbidden from making donations?

Of course the companies will find some workaround where they're highly dependent on government contracts and where they're being leaned on for donations. A few options that could still be legal, depending on how the Quebec laws are written:

• Hire a Party official as consultant on inflated salary; the official or the official's spouse donates to the Party.
• Rent property owned by the Party at inflated prices.
• Subscribe to a Party newsletter at a high subscription fee.
• Host Party events on corporate property for low/no rent.
• Pay very high speakers' fees to have party officials give breakfast or luncheon addresses for your staff.
• Have staffers work the parties' election campaigns as volunteers while still on the corporate payroll.

Or at least those are a few things that occurred to me within half a minute. Surely sharper folks than me with more at stake could come up with better ones.